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EXPORT ORIENTED UNITS (EOUs), ELECTRONICS HARDWARE TECHNOLOGY PARKS (EHTPs), SOFTWARE TECHNOLOGY PARKS (STPs) AND BIO-TECHNOLOGY PARKS (BTPs)

Chapter 6 - Policy - Foreign Trade Policy - DGFT - Chapter 6 - CHAPTER 6 6.00 Introduction and Objective (a) Units undertaking to export their entire production of goods and services(except permissible sales in DTA), may be set up under the Export Oriented Unit (EOU) Scheme, Electronics Hardware Technology Park (EHTP) Scheme, Software Technology Park(STP) Scheme or Bio-Technology Park (BTP) Scheme for manufacture of goods, including repair, re-making, reconditioning, re-engineering, rendering of .....

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of goods and services except items that are prohibited in ITC (HS). However export of gold jewellery, including partly processed jewellery, whether plain or studded, and articles, containing gold of 8 carats and above upto a maximum limit of 22 carats only shall be permitted. (b) Export of Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) shall be subject to fulfilment of the conditions indicated in ITC (HS). In respect of an EOU, permission to export a prohibited item .....

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exhibition held in India, all types of goods, including capital goods, required for its activities, provided they are not prohibited items of import in the ITC (HS) subject to conditions given at para (ii) & (iii) below. Any permission required for import under any other law shall be applicable. Units shall also be permitted to import goods including capital goods required for approved activity, free of cost or on loan / lease from clients. Import of capital goods will be on a self-certifica .....

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be made without payment of integrated tax and compensation cess leviable thereon under section 3(7) and 3(9) of the Customs Tariff Act, 1975 as per notification issued by the Department of Revenue and such exemptions would be available upto 31.03.2018 only. (iii) The procurement of goods covered under GST from DTA would be on payment of applicable GST and compensation cess. The refund of GST paid on such supply from DTA to EOU would be available to the supplier subject to such conditions and do .....

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from DTA, with or without payment of duties/taxes as provided at Para 6.01 (d)(ii) and 6.01(d)(iii) above, certain specified goods for creating a central facility. Software EOU/ DTA units may use such facility for export of software. (g) An EOU engaged in agriculture, animal husbandry, aquaculture, floriculture, horticulture, pisciculture, viticulture, poultry or sericulture may be permitted to remove specified goods in connection with its activities for use outside the premises of the unit. (h) .....

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I clearance, if any. (j) Procurement and export of spares / components, upto 5% of FOB value of exports, may be allowed to same consignee / buyer of the export article, subject to the condition that it shall not count for NFE and direct tax benefits. (k) BOA may allow, on a case to case basis, requests of EOU / EHTP / STP/ BTP units in sectors other than Gems & Jewellery, for consolidation of goods related to manufactured articles and export thereof along with manufactured article. Such good .....

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ation of NFE and DTA sale entitlement. Such procured / imported goods shall not be allowed to be sold in DTA. BOA may also specify any other conditions. 6.02 Second hand Capital goods Second hand capital goods, without any age limit, may also be imported with or without payment of duty/ taxes as provided under Para 6.01(d)(ii) above. 6.03 Leasing of Capital Goods (a) An EOU/EHTP/STP/BTP unit may, on the basis of a firm contract between parties, source capital goods from a domestic/ foreign leasi .....

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uty /Assistant Commissioner of Customs for entering into transaction of Sale and Lease Back of Assets , and submit full details of the goods to be sold and leased back and the details of NBFC; (ii) The goods sold and leased back shall not be removed from the unit s premises; (iii) The unit should be NFE positive at the time when it enters into sale and lease back transaction with NBFC; (iv) A joint undertaking by the unit and NBFC should be given to pay duty on goods in case of violation or cont .....

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reign Exchange Earnings EOU / EHTP / STP / BTP unit shall be a positive net foreign exchange earner. In addition sector specific provision of Appendix 6 B of Appendices & ANFs, where a higher value addition and other conditions are given, shall be required to be followed. NFE Earnings shall be calculated cumulatively in blocks of five years, starting from commencement of production. Whenever a unit is unable to achieve NFE due to prohibition / restriction imposed on export of any product men .....

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es 2015-20 6.05 Applications & Approvals/Letter of Permission / Letter of Intent and Legal Undertaking (a) (i) Application for setting up an EOU shall be considered by Unit Approval Committee (UAC)/ Board of Approval (BoA) as the case may be, as detailed in the Hand Book of Procedure. A detail of administration of EOUs and power of DC is given in HBP. (ii) In case of units under EHTP / STP schemes, necessary approval / permission under relevant paras of this Chapter shall be granted by offic .....

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oval, a Letter of Permission (LoP) / Letter of Intent (LoI) shall be issued by DC / designated officer to EOU / EHTP / STP / BTP unit. The validity of LoP/LoI shall be given in the Hand Book of Procedures. (b) LoP / LoI issued to EOU / EHTP / STP / BTP units by concerned authority, subject to compliance of provision in Para 6.01 above, would be construed as an Authorisation for all purposes. (c) Unit shall execute an LUT with DC concerned. Failure to ensure positive NFE or to abide by any of the .....

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ts in EHTP / STP/ BTP, and EOUs in Handicrafts /Agriculture/ Floriculture/Aquaculture/Animal Husbandry /Information Technology, Services, Brass Hardware and Handmade jewellery sectors. BOA may allow establishment of EOUs with a lower investment criteria. 6.07 Applications & Approvals (a) Deleted (b) Deleted (c) Deleted (d) Deleted 6.08 DTA Sale of Finished Products / Rejects / Waste/ Scrap / Remnants and By-products Entire production of EOU/EHTP/STP/BTP units shall be exported. However, the .....

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along with reversal of duties of Custom leviable under First Schedule to the Customs Tariff Act, 1975 availed as exemption, if any on the inputs utilized for the purpose of manufacturing of such finished goods (including by-products, rejects, waste and scraps arising in the course of production, manufacture, processing or packaging of such goods). No DTA sale shall be permissible in respect of, pepper & pepper products, marble and such other items as may be notified from time to time. (ii) S .....

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be subject to mandatory requirement of registration of pharmaceutical products (including bulk drugs). (iv) An amount equal to Anti Dumping duty under section 9A of the Customs Tariff Act, 1975 leviable at the time of import, shall be payable on the goods used for the purpose of manufacture or processing of the goods cleared into DTA from the unit. (v) The DTA sale by EOU/EHTP/STP/BTP units shall be subject to payment of excise duty, if applicable, and/or payment of GST and compensation cess alo .....

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shall also be subject to refund of any benefits under Chapter 7 of FTP availed by the EOU/supplier as per FTP, on the goods used for manufacture of the goods cleared into the DTA. (b) For services, including software units, sale in DTA in any mode, including on line data communication, shall also be permissible up to 50% of FOB value of exports and /or 50% of foreign exchange earned, where payment of such services is received in foreign exchange. (c) Gems and jewellery units may sell upto 10% o .....

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toms leviable under First Schedule of the Customs Tariff Act, 1975 availed as exemption on inputs on prior intimation to Customs authorities. Sale of rejects upto 5% of FOB value of exports shall not be subject to achievement of NFE. (e) Scrap / waste / remnants arising out of production process or in connection therewith may be sold in DTA, as per SION notified under Duty Exemption Scheme, on payment of applicable duties and/ or taxes and compensation cess. Such sales of scrap / waste / remnant .....

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axes shall not include applicable taxes and cess under the GST laws. (g) By-products included in LoP may also be sold in DTA subject to achievement of positive NFE, on payment of excise duty, if applicable, and/or payment of GST and compensation cess along with reversal of duties of Custom leviable under First Schedule to the Customs Tariff Act, 1975, if availed on inputs. (h) Deleted (i) In case of units manufacturing electronics hardware and software, NFE and DTA sale entitlement shall be reck .....

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e-service. The same can be cleared in DTA on payment of applicable GST and compensation cess along with reversal of duties of Customs leviable under First Schedule of the Customs Tariff Act, 1975 availed as exemption, if any 6.09 Other Supplies Following supplies effected from EOU / EHTP / STP / BTP units will be counted for fulfillment of positive NFE. Such supplies shall not include marble , except if such supply of marble is an inter unit supply as provided at Sub - Para(c) below: (a) Supplie .....

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(c) Supplies to other EOU / EHTP / STP / BTP / SEZ units, provided that such goods are permissible for procurement in terms of Para 6.01 of FTP. (d) Supplies made to bonded warehouses set up under FTP and / or under section 65 of Customs Act and free trade and warehousing zones, where payment is received in foreign exchange. (e) Supplies of goods and services to such organizations which are entitled for duty free import of such items in terms of general exemption notification issued by MoF, as m .....

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, as notified by the Ministry of Petroleum and Natural Gas vide notification No. E101 20029/18/2001-PP dated 28.01.2003 (hereinafter referred to as PDS Scheme) subject to the following conditions:- (i) Only supply of such quantity of LPG would be eligible for which Ministry of Petroleum and Natural Gas declines permission for export and requires the LPG to be cleared in DTA; and (ii) The Ministry of Finance by a notification has permitted duty free imports of LPG for supply under the aforesaid P .....

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P, besides discharge of export obligation, if any, on the supplier. The refund of GST paid on such supply from DTA to EOU would be available to the supplier subject to such conditions and documentations as specified under GST rules and notifications issued there under. (b) Suppliers of precious and semi-precious stones, synthetic stones and processed pearls from DTA to EOU shall be eligible for grant of Replenishment Authorisations at rates and for items mentioned in HBP. (c) In addition, EOU / .....

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eleted 6.12 Other Entitlements Other entitlements of EOU/EHTP/STP/BTP units are as under: (a) Exemption from industrial licensing for manufacture of items reserved for SSI sector. (b) Export proceeds will be realized within nine months. (c) Units will be allowed to retain 100% of its export earnings in the EEFC account. (d) Unit will not be required to furnish bank guarantee at the time of import or going for job work in DTA, where: (i) The unit has turnover of ₹ 5 crore or above; (ii) The .....

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cts or the rules made thereunder, on account of fraud / collusion / wilful mis-statement / suppression of facts or contravention of any of the provisions thereof; (e) 100% FDI investment permitted through automatic route similar to SEZ units. (f) Deleted (g) The Units Approval Committee may consider on a case-to-case basis request for sharing of infrastructural facilities among EOUs and it shall forward its recommendation to the Board of Approval for its consideration. While accepting such propo .....

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ror and transferee units as well as concerned Customs authorities, as per following procedure for movement of goods: i . The supplier EOU shall endorse on usual commercial documents, such as, tax invoice and delivery challan, the amount of duties of Custom leviable under First Schedule to the Customs Tariff Act, 1975 availed as exemption on inputs used in the manufacture of such finished goods (including byproducts, rejects, waste and scraps arising in the course of production, manufacture, proc .....

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uthorities of the supplier EOU. (b) Capital goods may be transferred or given on loan to other EOU / EHTP / STP / BTP / SEZ units, with prior intimation to concerned DC and Customs authorities on payment of applicable GST and compensation cess. Such transferred goods may also be returned by the second unit to the original unit in case of rejection or for any reason on payment of applicable GST and compensation cess. (c) Goods supplied by one unit of EOU/EHTP/STP/ BTP to another unit shall be on .....

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goods manufactured or produced from such goods in DTA. (ii) Upon receipt of goods, the recipient EOU shall submit endorsed copies of tax invoice to their jurisdictional Customs authority as well as to the jurisdictional Customs authorities of the supplier EOU. (d) In respect of a group of EOUs / EHTPs / STPs / BTP Units which source inputs centrally in order to obtain bulk discount and / or reduce cost of transportation and other logistics cost and / or to maintain effective supply chain, inter .....

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ssion from Customs authorities, sub - contract production processes to DTA through job work which may also involve change of form or nature of goods, through job work by units in DTA. (ii) These units may sub - contract upto 50% of overall production of previous year in value terms in DTA with permission of Customs authorities. (b) (i) EOU may, with annual permission from Customs authorities, under take job work for export, on behalf of DTA exporter, provided that goods are exported directly fro .....

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n EOU by foreign supplier on job work basis, would be allowed with or without payment of duties and/or taxes as provided under Para 6.01(d)(ii) above subject to condition that no DTA clearance shall be allowed. (iii) Sub - contracting of both production and production processes may also be under taken without any limit through other EOU/EHTP/ STP/ BTP/ SEZ units, on the basis of records maintained in unit. (iv) EOU/EHTP/STP/BTP units may sub - contract part of production process abroad and send .....

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Customs authority or returned to unit. Destruction shall not apply to gold, silver, platinum, diamond, precious and semi-precious stones. (d) Sub - contracting/ exchange by gem sand jewellery EOUs through other EOUs or SEZ units or units in DTA, shall be as per procedure indicated in HBP. 6.15 Sale of Unutilized Material (a) In case an EOU / EHTP/ STP/BTP unit is unable to utilize goods and services, imported or procured from DTA,it maybe: (i) Transferred to another EOU / EHTP / STP / BTP / SEZ .....

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tal goods and spares that have become obsolete/ surplus, may be exported or transferred to SEZ unit, transferred to another EOU/EHTP/STP/BTP/on payment of applicable GST and compensation cessor disposed of in DTA on payment of applicable GST and compensation cess and duties of Customs leviable under First Schedule of the Customs Tariff Act, 1975. Benefit of depreciation will be available in case of disposal in DTA only when the unit has achieved positive NFE taking into consideration the depreci .....

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sposal of left over material/ fabrics upto 2% of CIF value or quantity of import, whichever is lower, on payment of duty on transaction value, may be allowed, subject to certification of Central Excise/Customs officers that these are left over items. (d) Disposal of used packing material will be allowed on payment of duty on transaction value. 6.16 Reconditioning/Repair and Re - engineering (a) EOUs shall be set up with approval of UAC to carry out reconditioning, repair, remaking, testing, cali .....

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ency. Provisions of paragraphs 6.08, 6.09, 6.10, 6.13, 6.14 of FTP and Para 6.29(a), (b), (c) and (d) of HBP shall not, however, apply to such activities. 6.17 Replacement / Repair of Imported / Indigenous Goods (a) General provisions of FTP relating to export /import of replacement/repair of goods would also apply equally to EOU/EHTP/STP/BTP units. Cases not covered by these provisions shall be considered on merits by DC. (b) Goods sold in DTA and not accepted for any reasons, maybe brought bac .....

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cement (duty paid) from the authorized agents in India of foreign suppliers, provided the defective part is re - exported or destroyed. However, destruction shall not apply to precious and semi-precious stones and precious metals. 6.18 Exit from EOU Scheme (a) With approval of DC, an EOU may opt out of scheme. Such exit shall be subject to payment of applicable Excise and Customs duties and on payment of applicable IGST/ CGST/ SGST/ UTGST and compensation cess, if any, and industrial policy in f .....

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es and taxes and compensation cess on capital goods under the prevailing EPCG Scheme for DTA Units. This will be subject to fulfillment of positive NFE criteria under EOU scheme, eligibility criteria under EPCG scheme and standard conditions indicated in HBP. (e) Unit proposing to exit out of EOU scheme shall intimate DC and Customs authorities in writing. Unit shall assess duty liability arising out of exit and submit details of such assessment to Customs authorities. Customs authorities shall .....

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n a period of 7 working days. Between No Dues Certificate issued by Customs authorities and final exit order by DC, unit shall not be entitled to claim any exemption for procurement of capital goods or inputs. However, unit can claim Advance Authorisation / DFIA / Duty Drawback. Since the duty calculations and dues are disputed and take a long time, a BG / Bond / Installment processes backed by BG shall be provided for expediting the exit process. (f) In cases where a unit is initially establish .....

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the time of removal of such capital goods in DTA when exit. (g) An EOU / EHTP / STP / BTP unit may also be permitted by DC to exit under Advance Authorisation as one time option. This will be subject to fulfillment of positive NFE criteria. (h) A simplified procedure may be provided to fast track the Debonding/ Exit of the STP / EHTP Unit which has not availed any duty benefit on procurement of raw material, capital goods etc. 6.19 Conversion (a) Existing DTA units may also apply for conversion .....

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